S&P 500 E-Mini Forms a Minor Pullback

Market Overview: S&P 500 Emini Futures

The weekly S&P 500 Emini chart is forming a minor Emini pullback. The bulls want a strong retest of the March 21 high followed by a strong breakout above, starting the larger bull channel phase. The bears want at least a small second leg sideways to down after a pullback. If the market trades higher, they want a reversal from a lower high major trend reversal.

S&P 500 Emini Futures

The Monthly Emini Chart

• The March monthly Emini candlestick was a bear bar closing below March’s low with a prominent tail below.
• Last month, we said that until the bears can create a strong sell signal bar, odds continue to favor the market to trade sideways to up.
• April’s candlestick formed a sell signal bar following 5 months of strong rally.
• The bulls got a strong rally starting in October in the form of a 6-bar bull microchannel.
• Sometimes, there may be buyers below the first pullback following such a strong bull microchannel.
• If there is a deeper pullback, the bulls want another strong leg up completing the wedge pattern with the first two legs being July 27 and      March 21. 
• They want any pullback to be sideways and shallow (filled with weak bear bars, bull bars, doji(s) and overlapping candlesticks). 
• They want the pullback to form a higher low and the 20-month EMA or the bull trend line to act as support.
• The bears want a failed breakout above the all-time high, a reversal from a higher high major trend reversal and a large wedge pattern (Dec 2, July 27, and March 21).
• They got a sell signal bar in April. They will need to create follow-through selling to increase the odds of testing the 20-month EMA.
• Since April was a bear bar closing in its lower half, it is a sell signal bar for May.
• The market remains Always In Long and the move up from October is in a 6-bar bull microchannel. 
• There may be buyers below the first pullback from such a strong bull microchannel (perhaps holding the market up in the first half of May).
• The rally has lasted a long time and is slightly climactic. April was the first sign of a possible pullback phase.
• For now, the bears need to create follow-through selling to increase the odds of the pullback phase lasting at least 2-3 months.
• Traders will see if the bears can get a follow-through bear bar, or will the market reverse up retesting the prior high (Mar 21) instead.

The Weekly S&P 500 Emini Chart

• This week’s Emini candlestick was a bull doji with a long tail below closing near its high and trading above the 20-week EMA.
• Last week, we said that traders would see if the bulls can create a strong follow-through bull bar this week. The stronger the pullback (bounce), the more it will cast doubt on the strength of the bear’s resolve.
• The market traded sideways to down for most of the week but gaped up on Friday and closed the week as a bull doji with a long tail below. The bulls managed to get a follow-through bar albeit not a strong one.
• The bulls have a strong rally in the form of a tight bull channel. 
• They hope that the rally will lead to months of sideways to up trading after a pullback (broad bull channel).
• They want a strong retest of the March 21 high followed by a strong breakout above, starting the larger bull channel phase.
• At the very least, they hope to get a small retest of the prior trend extreme high (Mar 21), even if it only leads to a lower high (thereby forming a lower high major trend reversal).
• If the market trades lower, they want the 20-week EMA to continue acting as support. 
• The bears got a reversal from a higher high major trend reversal and a large wedge pattern (Feb 2, July 27, and Mar 21),
• They also got a final flag reversal (ioi pattern in March).
• They hope to get a TBTL (Ten Bars, Two Legs) pullback of at least 5-to-10%. They want at least a test of the 20-week EMA.
• The selloff has retraced more than 5% and has tested the 20-week EMA.
• The bears want at least a small second leg sideways to down after a pullback.
• If the market trades higher, they want a reversal from a lower high major trend reversal.
• Since this week’s candlestick is a bull doji with a long tail below, it is a buy signal bar albeit weaker.
• The market could still be in the sideways to up pullback phase. 
• However, traders should be open to the possibility of a second leg sideways to down after the current pullback. 
• Traders will see if the 20-week EMA will continue to act as support if the market retests it in the weeks ahead.
• For now, traders will see if the bulls can create a strong follow-through bull bar or will the market stall around the current levels followed by a second leg sideways to down.
• If the market retests the March 21 high instead but is weak (with doji(s), bear bars, and overlapping candlesticks), the odds of another strong leg down from a lower high major trend reversal will increase.